And if my 25% mineral interest in my 10-acre tract remains unleased, and ends up sitting inside a pooled 704-acre gas unit and it is not a drill site tract, it can't be pooled because it is unleased. I get zip for the life of the unit. Literally, I get paid nothing for as long as the well produces. Now let's talk about selling short.
Marsha:
Everyone has to do what they have to do; but, IMHO, this isn't the time to be signing a lease. Of course there are individual circumstances that might dictate doing something; but, IMO, these circumstances should be few and far between. As you mentioned in your post, oil/gas pricing is a mess right now and all oil related companies are scrambling to just keep their heads above water, so if a mineral owner does get an offer, it is going to be an extremely one side lease in favor of the leasing company and the bonus and royalty will be less than good. Again, IMO, 3/16 royalty went by way of the dinosaur, so 20% should be a minimum consideration; but, that is while the oil prices are low, so if someone just has to lease, why not consider an escalating royalty based on the price of WTI or the price being paid for your production. Personally, I will never sign another lease with a 20% royalty without adding a royalty escalation provision. Obviously, everyone will have to be their own judge and message these numbers to fit their needs. Example: <$50=20%, $51-$70 = 22.5%, $71-$110 = 25%, $111-$150 = 27.5% and above $150 is a pie in the sky thought; but, I believe it deserves a thought.
Rock Man, I used to cogitate and try to think up some new ideas to get shale to fracture. A couple wild ideas that came to me: 1. How about some sound waves blasting through the shale. I really hate that wildly loud rock or that other crap that is currently going on. I know it sure fractures my ear drums! 2. Another thing I thought about was a laser beam. The logistics would be pretty difficult I imagine to get a laser downhole and shooting about. This plasma stuff interested me a lot since it was a new method. I am pretty sure the plasma deal could have a lot of possiblility of getting some refinements, some good engineer is going to have a brainstorm and figure out some advancement with the procedure. There will be something in the future that we now have no clue about that will come along, that I am positive about. This stuff takes time, but pricing will speed up the process. A new cheaper and more effective cracking of the shale method could be worth even trillions of dollars and I am pretty sure there are a lot of researchers out the working on it. Often a backyard genius will make discoveries.
Escalating clause for price of oil is an interesting concept. Has this ever been tried? It would be a pretty complex to figure if the price would zig zag across the price break line a lot of times daily weekly or yearly. Could use the concept to use the price amount on the close of the last trading day of the month for that month or the next month, or use the price on the last trading day of the year for the new year coming. How about another royalty payment if the price hits a certain level on the last day of the year as long as the well is producing at a certain set level for the past year? That would be pretty easy to figure. If it is a barn burner everyone is still going to win.
LRJ:
I have no idea if anyone has ever signed a lease with this clause in it or not and I have never heard of anyone attempting it other than myself; but, I suspect that it has happened. I did try it back in 2008; but, due to the circumstances at the time, the thought didn't really get much of a chance of making it through the clause negotiating and cutting process. Anyway, back in 2008, when Denali first came into our area trying to find "easy takers" with a terrible 3/2 lease, $100/$50 and 3/16 royalty, I countered with a proposal starting at 3/16 and going through 25%. I wasn't even considering the bonus money in the thought process at the time; but, I was interested in the overall royalty percentage. Of course, they were the first ones to be leasing in my area in close to 30 years and they were anxious to grab as many unprepared souls as possible before the leasing herd made it to the area and they weren't interested in anything that I threw at them. By the time they came back with a $1000/$500, I was already talking to another company that was actually willing to talk in good faith about the total lease, so that issue never came up. In closing, yes there would have to be some thought as to how to manage an escalating royalty; but, it wouldn't be hard to do. Probably every three months based on the average price of that period or maybe even every six months based on the last three months average in that period. Whatever the case, oil field production technology is escalating at a very rapid pace and there is no reason that our lease clauses have to be based on old 19th century technology.
Where is your land located? What survey and Abstract #?
Send me a friend request and we can discuss it!
Well, nothing really happening in our area; but, Oil has definitely take a bumpy ride over the last couple of weeks. Slowly taking a dive below $40 and now it is back up above $45. I would personally pay more at the pump and see it continue to rise up to at least $70; but, I don't think that is going to happen any time soon, so the next best thing is to fill up all the vehicles one more time before the gas stations jump the prices again. I filled up in Houston on Wednesday $2.12/gallon and my wife just called and said that HEB in Bastrop was $2.25. The latest storm is potentially headed for the Gulf so who knows where we will be this time next week. Some of the news is predicting that this potential is one of the main reasons for the spike in crude.
This is an interesting graphic showing the active platforms in our part of the Gulf that could potentially be affected.
I got diesel in Elgin today for $2.09!
HEB and Walmart in Marble Falls at $2.00 on regular today .
i wish diesel was 4.00 and gas was 3.00 but againthat would mean oil is in demand.
"We just got the first significant sign Saudi Arabia is hurting for cash" I think the Saudis are hurting themselves more than anything. The only way they can stop shale drilling is to keep the price so low it hurts them. They would make more cash continuing their role as swing producer. Yep we are in the oil "bust" again was predicted. The thing is Saudi eventual plan is to get prices back up and when that happens these rigs down in storage in the shale regions will get back to work. They cannot undo the knowledge and know how of shale production. In a way as the price of oil went down it seemed like there was just that more incentive to find more economizing and new breakthroughs to lower the cost of shale oil production. Some high cost companies went or may go totally bankrupt but the good ones that put their rigs down for awhile will just go and drill like maniacs again when the price edge up to their profit zone. I thought at the time Saudis made a mistake and I still do.
Well, the local guys haven't totally thrown in the towel either. Not sure what the arrangement between Crimson and Enervest turned out to be; but, Crimson seems to be somewhat back in the game around here. Can't tell yet; but, guessing that this well will be drilled off the original Janecka Pad site with the lateral going in a NW direction rather than the Southeasterly direction of the original Janecka well. Interestingly, there is still one Janecka well that has been permitted by Enervest but, not drilled yet.
America's Oil Output Refuses to Collapse
Cost reductions and increased efficiencies continue in Shale fields.
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Hydraulic-fracking drillers find more sand means more oil
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A super-size experiment in the Eagle Ford shale formation
The concept of pumping more frac sand per foot has been in place for a while in the unconventional plays. Some operators have been pumping away over 2000 pounds of proppant per foot of lateral that is stimulated.
More proppant = more fractures initiated = more frac growth (sometimes)
But there is a limit.
There is a lot of info in corporate presentations that deal with this issues - as well as the parallel issues of types of proppants (and mixes of these types) as well as fluid types and volumes and pumping pressures as well as perf clusters and other things.
All these factors impact well performance
Thanks Rock Man! I always look forward to your commentary! There is something odd going on in Fayette County. Dawson Seismograph pickups I see going in various parts of the county but I never see any other seismographic activity like sensors and shot holes being drilled. I see the Dawson pickups in various areas on occasion. I don't see any other seismograph equipment though. I don't know how or what is going on with that. There was a big seismograph operation with the whole shooting match last fall with wires and shots and the whole deal but that was not Dawson. From what I heard it is Austin Chalk that is mostly the target in Fayette county on the whole.
Could be Dawson personnel working on permitting for upcoming shoot - talking to surface owners and negotiating permits / access agreements.
Just read in the Record that it is Seitel out of Giddings and they will use thumper trucks. I also misremembered last fall, the operation then was thumper trucks also.
LRJ:
Wasn't sure who or what group you were talking about over in your area; but, about 6 months ago Seitel was working the area between Muldoon and Cistern and evidently the overall shoot was pretty large. I believe I even looked it up on the Seitel site at the time. Not sure how far South they went; but, they definitely worked the area from FM 2237 , which is the road from Muldoon to Cistern, toward the North. I also saw them working over on FM 154 near West Point. Not sure who was sponsoring or paying for this shoot; but, I suspect that they were just tying in and closing the gaps to the big shoot they did back about 4 years ago.
Hopefully this will open up some new drilling opportunities at some point.
Yes that was Seitel. I know they finished up around Plum area just before planting. It was starting all that rain at the time but they finished before it really got the big rain amounts. That last Seitel shoot seems like it included the area from La Grange toward your place in general. This shoot seems to be ending about where that one started. They would not budge off $25 / acre.